THE RISE OF RURAL-TO-RURAL LABOR MARKETS IN CHINA

siying qiye (or privately operated firms). Leaders were encouraged to categorize firms as
private if firms were privately-run but “hang a collective sign” (gua jiti de pai).

Labor Movement and China’s Industrial Structure

Consistent with the economic development experience in other nations, China’s
modernization has triggered a massive transfer of rural labor into industry and services.
Migration has been an important means for many of China’s rural workers to find more
lucrative off-farm employment. The volume of migrant workers has reached up to 20
percent of the population in some of China’s urban areas (Wang , 1997).

China’s migration experience is shaped by urban and rural institutions unique to
its current economic environment. In urban areas, the household registration, or hukou,
system effectively prevented massive rural-to-urban migration during the pre-reform
period and continues to affect it today (Mallee, 1995). Before the economic reforms,
state controlled employment, housing, and food markets denied rural households basic
goods and services when they moved into cities. Today, government monopolization of
labor, housing and food markets has relaxed, but the state’s remaining influence in the
urban economy still denies access for most rural-to-urban migrants to the well-paid jobs,
comfortable living arrangements, and basic social services that residents of urban
registered households enjoy. Remaining restrictions affect the wages and length of stays
of rural-to-urban migrants (Wang, 1997).

The emergence of rural industry also distinguishes China’s development and
gives rural workers an alternative to migrating into cities. Rural industrial output and
employment has grown rapidly since the reforms and by 1995 the sector employed over

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